Annual report and accounts 2012

Debt finance

OAO Severstal and Subsidiaries
Notes to the Consolidated Financial Statements
22. Debt finance

for the years ended December 31, 2012, 2011 and 2010
(Amounts expressed in thousands of US dollars, except as otherwise stated)

 December 31,
 201220112010
Eurobonds 2013543,552543,552543,552
Eurobonds 2014375,000375,000375,000
Eurobonds 2016500,000500,000-
Eurobonds 20171,000,0001,000,0001,000,000
Convertible bonds 2017475,000--
Eurobonds 2022750,000--
Ruble bonds 2012-465,895492,176
Ruble bonds 2013493,865465,895492,176
Severstal Columbus bonds525,000525,000525,000
Other issued notes and bonds-1,783150,427
Bank financing991,3932,017,2302,474,183
Factoring of receivables9,632--
Other financing60,19544,12468,896
Accrued interest110,664110,675106,629
Discounting(71,061)--
Unamortized balance of transaction costs(53,700)(73,056)(81,562)
 5,709,5405,976,0986,146,477
    
Total debt is denominated in the following currencies:   
US Dollars4,743,2064,285,0944,192,629
Rubles518,0021,048,9151,092,543
Euro448,332642,089827,305
Other currencies--34,000
 5,709,5405,976,0986,146,477
    
Total debt is contractually repayable after the
balance sheet date as follows:
   
Less than one year1,382,1281,185,4671,423,551
Between one and five years3,070,6453,256,8973,096,833
After more than five years1,256,7671,533,7341,626,093
 5,709,5405,976,0986,146,477

Bonds issued

In April 2004, Citigroup Germany, a non-related party, issued US dollar-denominated loan participation notes in an aggregate principal amount of US$ 375.0 million for the sole purpose of financing a loan facility between the Group and Citigroup Germany. The loan is due in April 2014 and bears interest at an annual rate of 9.25% payable semi-annually in April and in October each year. As at December 31, 2012 the amount outstanding under this facility was US$ 375.0 million.

In July 2008, the Group issued US$ 1,250.0 million US dollar-denominated bonds maturing in 2013. Bonds bear an interest rate of 9.75% per annum which is payable semi-annually in January and July each year. As at December 31, 2012 the amount outstanding under this facility was US$ 543.6 million.

In February 2010, the Group’s subsidiary Severstal Columbus issued US dollar-denominated bonds in an aggregate principal amount of US$ 525.0 million maturing in 2018. These bonds bear an interest rate of 10.25% per annum, which is payable semi-annually in February and August each year, beginning in August 2010. As at December 31, 2012 the amount outstanding under this facility was US$ 525.0 million.

In February 2010, the Group issued ruble-denominated bonds in an aggregate principal amount of US$ 498.0 million maturing in 2013. These bonds bear an interest rate of 9.75% per annum, which is payable semi-annually in February and August each year, beginning in August 2010. As at December 31, 2012 the amount outstanding under this facility was US$ 493.9 million.

In October 2010, the Group issued US$ 1.0 billion US dollar-denominated bonds maturing in 2017. Bonds bear an interest rate of 6.7% per annum which is payable semi-annually in April and October each year, beginning in April 2011. These bonds were issued under the Group's newly established US$ 3.0 billion Loan Participation Note Programme. As at December 31, 2012 the amount outstanding under this facility was US$ 1.0 billion. The proceeds from the bonds issuance were used to fund the purchase of US$ 706.4 million nominal of Group’s US$ 1,250.0 million Eurobonds in US dollars and for refinancing of certain other Group’s debts.

In July 2011, the Group issued US$ 500.0 million bonds denominated in US dollars maturing in 2016. These bonds bear an interest rate of 6.25% per annum, which is payable semi-annually in January and July each year, beginning in January 2012. The proceeds from the bonds issuance were partially utilized to refinance short-term loan facilities. As at December 31, 2012 the amount outstanding under this facility was US$ 500.0 million.

In September 2012, the Group issued US$ 475.0 million senior unsecured convertible bonds maturing in 2017. The initial conversion price was set at US$ 19.08 per share. The conversion rights may be exercised at any time on or after November 5, 2012. The bonds bear an interest rate of 1.0% per annum, which is payable semi-annually in March and September each year, beginning in March 2013, and a yield-to-maturity of 2.0% per annum. Holders of the bonds have an option to require an early redemption of their bonds in September 2015 at the accreted principal amount at such time plus accrued interest. The Group also has an option for early redemption, exercisable starting from October 2015, provided the market value of the Group’s GDRs deliverable on conversion of the bonds exceeds 140.0% of the accreted principal amount of the bonds over a period specified in terms and conditions of the bonds. The proceeds from the bonds issuance were mainly used to refinance existing indebtedness and for other general corporate purposes. As a result of this transaction US$ 66.8 million was recognized in equity, determined based on the market rate of 5.3% per annum. As at December 31, 2012 the amount outstanding under this facility was US$ 475.0 million.

In October 2012, the Group issued US$ 750.0 million bonds denominated in US dollars maturing in 2022. These bonds bear an interest rate of 5.9% per annum, which is payable semi-annually in April and October each year, beginning in April 2013. The proceeds from the bonds issuance will be used for general corporate purposes, including refinancing of debt maturing in 2013. As at December 31, 2012 the amount outstanding under this facility was US$ 750.0 million.

Bank financing

In December 2007 the Group entered into a syndicated facility with the European Bank for Reconstruction and Development (EBRD) (subsequently amended in March 2008), for a maximum principal amount of € 600.0 million. The facility expires in 2017 with the outstanding principal amount being amortized from 2009 until the expiration date and bear interest at EURIBOR six month plus 2.0-2.2%. As at December 31, 2012 the amount outstanding under this facility was US$ 349.2 million.

Debt finance arising from banks and unused credit lines were secured by the following charges:

  • US$ 2,716.6 million (December 31, 2011: US$ 2,677.9 million; December 31, 2010: US$ 2,255.0 million) of the net book value of plant and equipment;
  • US$ 1,058.6 million (December 31, 2011: US$ 1,280.8 million; December 31, 2010: US$ 892.3 million) of current assets and revenues from export contracts;
  • US$ nil (December 31, 2011: US$ 5.7 million; December 31, 2010: US$ 112.0 million) of investments to available-for-sale financial assets;
  • all Group’s investment in Mountain State Carbon LLC, Spartan Steel Coating LLC and Double Eagle Steel Coating Company, the Group’s joint ventures, at December 31, 2012 and 2011;
  • all Group’s ownership in Societe Des Mines de Taparko and Guinor Gold Corporation, 50% of Group’s ownership in Mountain State Carbon LLC, the Group’s subsidiaries, and investments in Spartan Steel Coating LLC and Double Eagle Steel Coating Company, the Group’s joint ventures, at December 31, 2010.

A part of the Group’s debt financing is subject to certain covenants. The Group complied with all debt covenants, including equity ratios, during the years ended December 31, 2012, 2011 and 2010.

At the reporting date the Group had US$ 150.0 million (December, 31, 2011: nil; December, 31, 2010: nil) of unused short-term сredit lines and US$ 772.1 million (December 31, 2011: US$ 393.4 million; December 31, 2010: US$ 350.0 million) of unused long-term credit lines available to it.